FTSE 100 higher as German business confidence improves, sterling rises after dovish FOMC minutes

Proactive Investors –

FTSE 100 moves higher, up 17 points
Dr Martens tumbles after disappointing trading update
Sterling rises after “dovish” FOMC minutes
10.10am: German business confidence improves in November

Over in Europe, the closely watched IFO Institute’s business climate index rose to 86.3 in November suggesting an improvement in German business morale.

Although still at a low level the improvement from 84.5 in October was welcomed by economists.
Carsten Brzeski, global head of macro at ING Economics said: “The strong improvement of the Ifo index adds to recent glimmers of hope.”

“However, this simply reflects a stabilisation at low levels and there is no reason to change the recession call, yet.”

“The sheer fact that things are no longer getting worse doesn’t mean that improvement is around the corner.”

“The downsides still outweigh the upsides: new orders have dropped since February and inventories have started to increase again, a combination that never bodes well for future industrial production.”

Invoking a football analogy he concluded: “At the current juncture and despite today’s encouraging Ifo index reading, the question is what is more likely: the German economy avoiding recession or the German national football team still making it into the next round. We wouldn’t put much money on either of the two.”

9.47am: Unite and Empiric advance as RBC lifts price target

Shares in Unite Group (LON:UTG) rose 3% and Empiric Student Property PLC by 1.8% as RBC Capital Markets upped its price targets for both companies by around 7% to 1,100p and96p respectively.

“The rising demand-supply imbalance for UK student accommodation and continued double-digit rent growth in the wider private rented sector lead us to raise our mid-term market rent growth estimates by c.100bp on average” analysts at the broker wrote.

EPS estimates for Unite and Empiric were also increased by around 4% and the broker kept an outperform rating on Unite and sector perform rating on Empiric.

“We believe Unite’s relatively attractive room pricing leaves it well positioned to maintain close to full occupancy and deliver higher rent growth” it said.

9.10am: Subdued start for Footsie but sterling advances

FTSE 100 is hovering around opening levels with rising Covid cases in China denting sentiment although trading is likely to be subdued with US markets closed for Thanksgiving.

Victoria Scholar, head of Investment, interactive investor said: “On a quieter than normal day because of the Thanksgiving holiday stateside, European markets have opened tentatively higher except for the FTSE 100, which is trading softer.”

Vodafone (LON:VOD) PLC topped the FTSE 100 fallers, down 3.7%, after a downgrade to underperform by Credit Suisse (SIX:CSGN). The stock is also trading ex-dividend today.

Sterling was a touch firmer today, after strong recent gains, briefly topping $1.21 for the first time since mid-August after the FOMC minutes yesterday which suggested smaller rate rises may be on the way across the pond.

A stronger pound could help cool the UK’s inflation crisis, as it will make imported goods like fuel and energy less expensive – although sterling is still down 10% against the dollar this year.

8.45am: Ofgem lifts energy price cap

The government will have to pay more to support households with their energy bills from January, after the regulator increased its energy price cap.

However, it will not affect how much households pay as this has been limited by the government.

Under the Energy Price Guarantee (EPG), the typical household is currently paying £2,500 a year for energy.

But Ofgem said that without government support households would have paid £4,279 from January.

In normal times, the energy price cap would set the maximum amount suppliers can charge households per unit of energy.

8.17am: FTSE 100 a touch higher, Dr Martens slumps

FTSE 100 hovered around opening levels in early trading in what may be a subdued session with US markets closed for Thanksgiving.

Just after the open the lead index was up 3 points to 7,469.

Retailers were in focus following a series of trading updates. Dr Martens PLC slumped 17.6% after the shoe retailer reported slower revenue and lower profits in the first half and warned that it expects lower profit margins for the full year due to further investment.

Due to the investment, full year EBITDA margin will be 100-250 basis points lower than last year, the company cautioned.

Kingfisher PLC (LON:KGF) dipped 2%, despite a rise in third quarter sales, as it lowered the top-end of its full-year profits guidance to £760mln from £770mln before giving a range of £730mln to £760mln.

But Jet2 PLC was an early riser as the low cost airline and holiday operator reported higher interim revenues and profits and said it was on course to deliver above forecasts full-year profits.

Shares rose 1.5% as the company said “We are presently on track to exceed current average market expectations for group profit before FX revaluation and taxation for the year.”

7.45am: Kingfisher boosted by demand for energy efficient products

A busy day for updates from retailers. B&Q owner, Kingfisher PLC (LSE:KGF), reported a slight improvement in third quarter like-for-like sales reflecting strong demand for energy efficiency products which supported DIY sales.

Third quarter sales of £3.3bn were up 1.7% in constant currency and 0.2% like-for-like, an improved picture when compared to the 4.1% fall in the first half.

The FTSE 100 listed retailer also pointed to a good start to trading in the fourth quarter with three-year like-for-like growth of 16.2% and 2.8% for the three weeks to 19 November 2022.

“Sales remain resilient across our customer segments (DIY and DIFM/trade) and banners, with ongoing strength in energy efficiency product sales and demand from the trade segment.”

But it lowered the top end of guidance for full-year 2023 adjusted pre-tax profit in the range of c.£730mn to £760mln from £730mln to £770mln before.

7.00am: FTSE 100 seen slightly lower

The FTSE 100 is set to open slightly lower despite gains in US markets after the release of the FOMC minutes was viewed positively.

Spread betting companies are calling the lead index down by around 7 points.

The minutes from the Fed’s November policy meeting showed “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.”

They noted that a slower pace would better allow the Federal Open Market Committee to “assess progress toward its goals of maximum employment and price stability”.

Michael Hewson chief market analyst at CMC Markets UK said: “Last night’s Fed minutes reaffirmed the initial market reaction to the Fed statement earlier this month with most officials backing the slowing of the pace of hikes soon, with several officials seeing risks from further rapid hikes.”

“This tone reinforces the narrative that 50bps is coming in December with subsequent hikes likely to be between 25bps and 50bps.”

But he added: “Last night’s positive US finish doesn’t look as if it will give markets here in Europe a significant early leg up, with the FTSE100 feeling the drag from further weakness in oil prices on the back of rising covid cases in China, however trading is quite likely to be light in the absence of the US for the Thanksgiving break.

In London, trading updates and results are due from Intertek Group PLC (LON:ITRK), Kingfisher PLC (LON:KGF), Safestore Holdings Plc (LON:SAFE), Dr. Martens PLC (LON:DOCS) and Motorpoint Group PLC (LON:MOTR) amongst others.